Inheritance Tax Act 1984 section 13A

Dispositions by close companies to employee-ownership trusts

Section 13A provides an exemption from inheritance tax when a close company transfers property to an employee-ownership trust, provided certain conditions about trading status, employee benefit, and controlling interest are met.

• A transfer of property by a close company to an employee-ownership trust is not treated as a transfer of value for inheritance tax purposes, provided three conditions are satisfied.
• The close company must meet a trading requirement, the trust must meet an all-employee benefit requirement, and the trust must acquire a controlling interest in the company by the end of the tax year in which the transfer takes place.
• The controlling interest condition requires that the trust does not hold a controlling interest at the start of the tax year but does hold one by the end of that year, meaning the exemption applies in the year the trust first gains control.
• The detailed definitions of the trading requirement, all-employee benefit requirement, and controlling interest requirement are drawn from the Taxation of Chargeable Gains Act 1992.